Nuclear Industry Re-Energizing after Fukushima

Nuclear Industry Re-Energizing after Fukushima

Reconstructing nuclear confidence in post-Fukushima world is a long and painful process. But real-life energy demands especially in the developing countries predetermine a significant share of nuclear energy in their national energy consumption structure. Russian experience in this field can offer some interesting solutions to the decision-makers.

Fukushima incident has contributed a lot to the lay belief that nuclear energy use is a risk not worth taking. Although, according to the data of the non-profit World Nuclear Association only a very limited number of accidents occurred in over 14,500 cumulative reactor-years of commercial nuclear power operation in 32 countries. The Three Mile Island, Chernobyl and Fukushima are the most notorious examples of “Houston, we’ve had a problem”crisis situations. Is it possible to find balance between reasonable public concerns and nuclear generation crucial for economic growth? Russian experience in the reconstruction of global nuclear confidence can offer some interesting solutions to the post-Fukishima world.

Nuclear power use goes hand in hand with irrational fears especially in the so-called developed countries. A popular genre of post-apocalyptic drama[1] has been thrilling the Western consumers with pictures of polluted wastelands and toxic rains for several decades. No wonder Fukushima incident triggered the downfall of atomic industry in the EU: Germany adopted a total ban, Switzerland and Spain banned the construction of new reactors. Independent data analysis shows that the roots of these radical decisions lie in the sphere of crowd psychology – the politicians influenced by the green lobby had to stop the atomic panic. However, all energy specialists know: the impact of potential human errors in the nuclear sector has considerably decreased. According to the OECD report risk statistics, natural gas and nuclear industry appear to be the safest energy sources. The contrast is especially striking in comparison with other realistic energy options (see a timeline by The Guardian Datablog). “Of those we have identified, six accidents happened in the US and five in Japan. The UK and Russia have had three apiece”, – Simon Rogers wrote counting accidents with nuclear reactors after the Japanese tragedy in 2011.

chart1

Source: Paul Scherrer Institut, 1998, considering 1943 accidents with more than 5 fatalities. One TW.yr is the amount of electricity used by the world in about 5 months.

It explains why many sovereign governments like China, India and Iran want to see Russia’s Atomstroyexport as their contractor, despite the fact that they have their own peaceful atom programs. Last April Finnish Fennovoima also invited Atomstroyexport (along with Toshiba) to take part in a tender for building the sixth nuclear reactor in the country. The first two Finnish reactors were built by Russian specialists, the third and fourth by the Swedish company. The fifth reactor is now under construction by Germans and French.

Iranian facility in Bushehr is a unique example of engineering expertise. Russian specialists solved many technological problems and successfully integrated German structural elements into the new reactor. In the late 1990-es Siemens AG (Germany) quit the project mostly for political reasons, leaving behind tons of old hardware. Nevertheless, with the help of Iranian scientists the reactor of Bushehr nuclear power plant’s Unit 1 was brought up to 100 per cent of its projected capacity on August 30, 2012, the representative of Atomstroyexport announced last year. Setting all ideological considerations aside, the completion of the project in such highly seismic area was truly a landmark event for the whole industry. Bushehr facility successfully passed a harsh stress-test during the latest earthquake in Iran.

After 2011 Rosatom went global and concentrated on its key export project- the NPP-2006. Now this reactor combines both active and passive safety systems. Innovative solutions include advanced molten core catchers, passive heat decay removal system and other updated protection elements. At the same time US-Japanese and European companies are primarily developing passive nuclear safety systems because power outage reports influenced their risk analysis.

Photo source: Mehr NA

Photo source: Mehr NA

Earlier in the 20th century the Three Mile Island incident in the US (1979) lead to massive anti-nuclear protests and inspired the sociological theory of “system or normal accidents” by Charles B. Perrow, which both significantly slowed down the research in the US civil nuclear industry. In short, the theory holds that high-risk systems are prone to failures however well they were managed. Western companies simply lacked field data on various types of accident situations.

In contrast Russian specialists since Chernobyl have become really paranoid about disaster prevention and safety issues both on practical and theoretical level. For instance, Russian reactors can stand a direct collision with a falling plane – who could have ever expected it is necessary in the pre-9/11 world? If Rosatom’s modern NPP had been installed in Japan, Fukushima incident might not have happened. Or, at least, the consequences would have been not so devastating.

This year on April, 26 Russia mourned the 25th anniversary of the tragic events in Chernobyl. It was a painful lesson to learn. Russia has done its homework and now its nuclear power plants are the most reliable and technologically advanced atomic facilities on the market. One cannot but hope that politicians all over the world will understand that sometimes it is necessary to put safety concerns before lucrative business deals with politically “comfortable” partners. Paraphrasing one famous advertising motto, in the nuclear industry you should really get the best or nothing. Such strategy may help the decision-makers on nuclear projects to strike the happy medium between environmental concerns and actual energy demands.


[1] See, for example, famous book “The Road” by American novelist Cormac McCarthy and many other TV shows and computer games, not to mention Mr. Burns from “The Simpsons”.

Europe embraces Nord Stream expansion

Europe embraces Nord Stream expansion

European countries, including the Netherlands, Finland and the United Kingdom expressed their interest in the expansion of Nord Stream. The third and fourth strings of the pipeline enjoy the highest level of political support in Europe. As a result Nord Stream will be the cornerstone of European energy security in the decades to come.

Nord Stream expansion rumors have been circulating in various business papers for more than a year. Following Putin-Merkel talks, this project gained necessary political dimension. In her official statement in November, 2012 Chancellor of Germany Angela Merkel praised it as “a major success”. Since then, many things have changed. Gazprom commissioned the second string of the pipeline and aims for the third and fourth section. This month Nord Stream AG has published the Project Information Document (PID) on the extension project. Many European countries, including the Netherlands, Finland and the United Kingdom expressed their interest in the expansion of the pipeline. Finally, the Netherlands’ Gasunie made a first step and inked a document exploring the possibilities for further energy cooperation with Russia. Chances are good that with such business background Nord Stream extension may become a matter of common interest for many players with different geopolitical orientation.

As usual, energy matters are closely intertwined with foreign policy. Although sometimes it resembles an old children’s game of hide and seek. For instance, the European Union set up a bulky bureaucratic firewall, called “third energy package” and tried to impose it on the Russians, but to no avail. Gazprom responded with a new cunning scheme of restructuring its assets in Europe. Instead of changing the rules of the game in the crisis-hit Eurozone, the EU authorities should have concentrated on economic growth, not on politically charged red tape. Otherwise by the time Russian strategic commodity finally arrives in Europe, the industrial sector of the continent will be in bad condition. These political divisions, however, seem to be off the table. Now the sovereign European states are competing with each other to take part in Nord Stream. Project scenario analysis reveals specific interests of pipeline’s stakeholders and shows potential benefits for its future contractors.

Russia’s Gazprom wants to mitigate transit risks in the unstable Ukraine and establish a new regional line of natural gas supplies to Europe. Such innovative project will undoubtedly strengthen Gazprom’s position on the global market, challenged by the media hype about recent shale bubble in the US. Besides, Nord Stream development will provide the Russian economy with contracts and jobs – major industrial players NLMK and Severstal are planning to supply pipes for it. Russian company has reasons to maintain positive outlook. The second string was successfully commissioned in October, 2012 with total design capacity of 55 billion cubic meters. It happened just before the outbreak of exceptionally cold winter in Europe. At the same time Nord Stream AG consortium, founded by Gazprom, Germany’s Wintershall Holding and E.ON Ruhrgas, the Dutch Gasunie and France’s GDF Suez examined the preliminary results of the feasibility studies for the construction of the third and fourth strings and came to the conclusion that their construction was economically and technically feasible. European LNG shortages in March, 2013 proved the validity of this statement.

In April, 2013 Gazprom announced that there are two possible routes for Russian natural gas: a separate pipeline extension to Central Europe via Poland or further expansion of the existing Nord Stream network. According to the company’s statement, Nord Stream shareholders have decided not to sign any legally binding agreements on construction of the third and fourth lines within the next six months. “Until October, 2013 a feasibility study for the Yamal-Europe 2 [gas pipeline] is to be completed, which will provide clarity on technical and economic viability of the project,” the statement said quoting Russian company’s CEO Alexei Miller. Can Russian gas giant really repeat its breakthrough into the Western Europe and Scandinavia with the third and the fourth string of the pipeline? It will depend on the course of talks with potential contractors.

Last month William Hague, British foreign secretary, effectively discussed with his Russian colleague Sergei Lavrov the possibility of Nord Stream’s extension to the United Kingdom. “Russia is a vital energy supplier for Europe”, said Hague. One can see here a clear contradiction between the political rhetoric of the Foreign Office and economic reality. Cold bilateral relations cannot change the simple fact: Great Britain needs Russian gas by 2020, as the North Sea output declines. “The UK welcomes new sources of gas, including potentially from Russia,” said Chris Barton, head of energy supply security at the UK’s Department of Energy and Climate Change in fall, 2012.

According to EIA data, natural gas production in the UK has been falling since 2000, while the level of consumption has remained more or less the same. Despite the evident industrial downturn in the British economy, natural gas still plays a very important role in the overall energy balance of the UK (see Overall data tables in “Energy consumption in the UK”-2012 report). In the mid-term Nord Stream supplies may become one of the pillars of the UK’s low-carbon energy strategy. Natural gas is a “perfect partner” for economies like Britain’s, which needs reliable supplies for a low-carbon future, thinks Paul Van Gelder, president of state-owned Dutch energy company Gasunie. The chief partner of the project from the British side might be BP: this oil and gas supermajor has necessary competence and commitment to working in Russia. BP has made clear that it “maintains an interest in the project, but a final decision on participation is pending.”

Germany has been a long-time supporter of natural gas supplies from the East, because of its unhesitating and respectworthy choice of environmentally safe fuel. In Germany nuclear energy use is banned and fracking technology is strictly limited. Nevertheless, natural gas remains a reliable energy source, which makes it an obvious sustainable choice. “If Europe wants to assert itself in global competition, this won’t work without Russian gas in particular,” said Former German Chancellor Schröder during the opening ceremony of the second string of the pipeline. Chancellor Merkel also highlighted the strategic importance of this project: “Nord Stream has strikingly shown that the state and the private sector can form a constructive and productive unit across several national borders. We can be proud of this truly European collaboration”. It should be noted that the German market can be viewed as a gateway to the gas consumers in Denmark, Sweden and France.Nord Stream 3

In April, 2012 Finland granted Nord Stream AG consortium permission to study the Baltic Sea bed in its sovereign economic zone for the possible extension of the subsea gas line (the Finnish route section will be 230 miles long). The current Environmental Impact Assessment (EIA) examines water quality and ship traffic. The Baltic States, however, turned down all preliminary offers. In December, 2012 Estonian officials again denied permission for Nord Stream expansion studies. The government rejected a similar request in 2007. Even German participation in the project couldn’t break the deadlock in negotiations. Such obstructionist position of the Baltic States is especially regrettable, if we consider that their final contracted energy demand cannot be met without Russian gas (see data in a 2010 working paper on Gas Supply Security in the Baltic States by Cambridge University’s EPRG).

The Netherlands has ambitions to develop its natural gas infrastructure (for example, the LNG-facility in Rotterdam) and become a pan-European gas hub. That’s why in the Netherlands Nord Stream enjoys the highest level of political support. Earlier in April Gazprom and Gasunie inked a memorandum of agreement in the presence of Vladimir Putin, President of the Russian Federation and Mark Rutte, Prime Minister of the Netherlands. In the opinion of the Dutch side, natural gas infrastructure have unique properties enabling to maintain the balance between energy consumption on one hand and unpredictable supplies of renewable energy sources on the other hand.

We can see now why Nord Stream project is backed up by influential players in the European energy sector. Most probably the third and the fourth sections of the pipeline will be implemented, despite some negative political signals from the Baltic Region. However, strict environmental compliance procedures demanded by the Scandinavian countries might cause some minor delays. The future of Nord Stream extension also depends on the ongoing feasibility study of the second leg of the Yamal-Europe 2 project, which runs from Russia via Belarus and Poland to the Polish-German border. But in any case Nord Stream will be the cornerstone of European energy security in the decades to come.

Read the first part of our research on the South Stream project in the Eastern Europe.

Nord Stream Fact Sheet

  • Nord Stream is a twin pipeline system through the Baltic Sea transporting natural gas from Russia to Europe;
  • It runs across the Baltic Sea waters from the Portovaya Bay (near Vyborg) to the German coast (near Greifswald) stretching over 1224 kilometers;
  • The third and fourth lines are planned for annual capacities of 27.5 billion cubic meters each;
  • The stakes in Nord Stream AG are distributed as follows: Gazprom holds 51%, Wintershall Holding and E.ON Ruhrgas – 15.5% each, Gasunie and GDF Suez – 9% each;
  • Nord Stream will export gas from the Yuzhno-Russkoye oil and gas field, the Yamal Peninsula, Ob and Taz Bays and in perspective Shtokman field;
  • The cost of construction of the first two sections was $7.4 billion.

EU climate chief: Forget US-style shale gas revolution

EU climate chief: Forget US-style shale gas revolution

EU Climate Commissioner Connie Hedegaard stressed that the geological and geographical factors of Europe shale did not make its large-scale exploitation as cost-effective as in North America.

The Paris-based International Energy Agency (IEA) also has doubts about shale gas, saying increased production would only make sense if it replaces highly-polluting coal.

Earlier in April Irish Energy Minister Pat Rabbitte said that no fracking will be allowed in the Republic until sound scientific evidence is available.

Finally, the German environment minister Peter Altmaier said in February, 2013 that the extraction of natural gas using the so-called fracking technology wouldn’t start any time soon in Germany. He has announced that laws will be stiffened rather than softened.

The complete list of countries that banned fracking can be found here.

Source: USA Today

Source: USA Today

Russia is the world leader in natural gas reserves and second in terms of gas production. It also has large unconventional gas reserves. Now Russian gas companies are actively studying the hydraulic fracturing process and all possible negative environmental implications of this technology.  Does Russia really have large unconventional gas reserves?

A Gazprom board member, Igor Yusufov, said that company’s 28 trillion cubic metres of booked gas reserves is sufficient to meet its domestic and export obligations for “decades”. As much as 90 percent of Russia’s unconventional resources are located in the east, mainly in the Urals and Siberia. Oal-bed methane and tight-gas ventures, already under development as pilot projects, may start producing after 2020, while development of hydrates and shale will not start before 2025 or 2030. In other words, fracking will not affect Russian export in the midterm.

Russian President Vladimir Putin has recently commented on the situation around shale gas opportunity: “It’s a hard question, whether we have slept through it or not. There is no answer yet because gas extracted from shale costs several times more than gas recovered by traditional means.”

“Shale gas and shale oil are produced at huge – and I want to stress huge – environment-related cost. A lot of people who live where shale gas is produced get black slurry coming out of their taps and this technology needs major refinement at the very least,” he added speaking on the Russian TV show. Nevertheless “this does not mean we are turning our back on shale gas – international experts say Russia has big prospects”.

Editor’s note:  Summarizing all the data I can say that fracking hype is overblown for marketing or speculative reasons. Undoubtedly shale gas development has become a major factor on the inner US market but it is far from being a “revolution” of any sort – just a perspective technology.

Read more:

Fracking will not affect global fuel balance in the midterm

Five states granted observer status in the Arctic Council

Five states granted observer status in the Arctic Council

China, India, Italy, Japan, Republic of Korea and Singapore were granted new Observer States status at the Eighth Ministerial Meeting of the Arctic Council convened in Kiruna, the northernmost city of Sweden.

The council’s final declaration, though, recognized “the central role of business in the development of the Arctic,” though it called for development to be conducted in ways that would sustain indigenous peoples and the environment, The New York Times writes.

Foreign ministers from the Arctic Council’s member states have also signed a legally binding agreement on preventing and responding to oil spills in the Arctic to protect the region’s waters. The treaty is “an effective tool protecting the Arctic environment at a time of active exploration of the opening Arctic deposits, and shows the firm responsibility of the Arctic states for the situation in the region,” Russian Foreign Minister Sergei Lavrov said at the opening of the council’s ministerial session in Sweden’s northernmost city of Kiruna.

The Northern Sea Route has become increasingly viable for longer summer months, allowing shipping from Asia to Europe to traverse the Arctic in far less time than the traditional route through the Indian Ocean, the Suez Canal and the Mediterranean.

Source: RIA Novosti

Source: RIA Novosti

Editor’s note:  Kiruna conference wrap up – what does all these optimistic declarations like “Arctic Vision” mean in reality?

  • Most Arctic land and resources have a sovereign owner. That’s why the Arctic Council granted observer status to five more non-littoral states so easily. Redivision of the world in the High North may spark unprecedented conflict and the new observer states understand it very well. New observers seek nothing but political prestige;
  • Arctic ice is melting although nobody knows exactly how quickly. There are conflicting opinions in the scientific community. As always there are skeptics. Their arguments are very similar to all these “global-warming-is-a-hoax” stories;
  • Final configuration of state borders in the Arctic will be sealed after the possible approval of Russia’s final claim to a portion of the Arctic shelf in December, 2013. Hopefully after that we won’t see any more spoof news with apocalyptic headlines about possible naval confrontation in the region;
  • Maritime boundary delimitation in the Arctic doesn’t mean that littoral states will stop muscle-flexing. First, it is cool to show off as an Arctic leader. Second, Navy budget planners need love too.
  • Oil spills agreement is bad news for Shell, Statoil, Gazprom Neft etc.

Read more:

Interview with French expert in geopolitics A. Latsa: “The Arctic has never been so important”

Conditions fulfilled for South Stream construction in Serbia

Conditions fulfilled for South Stream construction in Serbia

Serbia is ready to start building its section of the South Stream pipeline, Srbijagas Director-General Dusan Bajatovic said. Bajatovic and Dragan Duncic, acting director of the Republic Agency for Spatial Planning, signed an agreement on the draft of amendments to the Spatial Plan for Special-Purpose Areas – transnational pipeline South Stream through Serbia.

Documents have been prepared, all contracts signed and the final route gas been determined for both the main pipeline and extensions to Croatia and Republika Srpska (Bosnia-Herzegovina), Bajatovic announced.

Srbijagas will approve the general pipeline project by June 30, after which tenders will be held for the right to supply pipes and compressors.

Mr. Bajatovic expressed hope that the license for commencing construction work in Serbia would be obtained by autumn.The pipeline may produce the first profit in 2016 and the first payments to Serbia’s national budget are due in the same year.

Read more:

South Stream shapes European energy security, Nabucco falls behind

New era in relations between Serbia, Russia

China, Russia to launch global rating agency

China, Russia to launch global rating agency

The Universal Credit Rating Group (UCRG) is a new global rating agency which is set to offer an alternative to the big three US credit rating agencies. Many experts say the Western CRAs are largely to blame for fuelling the crisis with their inaccurate and excessively high ratings for problematic asset-backed securities.

UCRG is due to launch next month in Hong Kong, and is a joint Chinese (Dagong Global Credit Rating), Russian (RusRating), and American (Egan-Jones Ratings Co) venture. The three credit rating agencies will form a strategic alliance, but there will be no merger of the three companies.

Dagong has stated that the new organization will be an independent credit rating agency. It will not represent the interest of any particular country or group. Chines CRA has been following an aggressive expansion policy in the recent years, opening offices in different countries based on franchising agreements. Dagong hopes to eventually challenge the American “big three” credit rating agencies – Moody’s, Fitch and Standard & Poor’s.

Russia to invest $1 billion in the extraction of rare earth metals

Russia to invest $1 billion in the extraction of rare earth metals

Russia plans to invest $1 billion in the extraction of rare earth metals to compete with market leader China which controls around 97% of world production. Russia’s state-owned company Rostekh and the IST group of companies, owned by businessman Aleksandr Nesis, are planning to create a joint venture, RT Business writes.

The new joint venture of Russian companies intends to develop the Tomtorsky field in Russia’s Yakutia region. The 250-square-kilometer field is considered one of the largest in the world and its reserves are estimated at 154 million tonnes of ore containing yttrium, niobium oxides, scandium and terbium.rare-earth-element-map-380

A 2011 report issued by the U.S. Geological Survey and U.S. Department of the Interior, “China’s Rare-Earth Industry”, outlines industry trends within China and examines national policies that may guide the future of the country’s production. The report notes that China’s lead in the production of rare-earth minerals has accelerated over the past two decades.  Currently China has around 97% of the world production, but restricts the exports of rare earth metals.

Rare earth metals are a set of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium. These metals are essential to civilian and military technologies and to the 21st century global economy, including green technologies (e.g., wind turbines and advanced battery systems) and advanced defense systems. Rare metals are also critical in most mobile devices, computer disk drives and televisions.

One-fifth of Germans support the party of Euro-skeptics

One-fifth of Germans support the party of Euro-skeptics

Eurosceptic sentiments are spreading like wildfire in Germany despite the efforts of the mainstream political parties and the corporate media to ignore the popular movement. The newly formed Euro-skeptic party “Alternative for Germany” (“Alternative für Deutschland”) is gaining support. A growing number of voters may vote for the eurosceptic politicians on the coming German federal elections (22 September 2013).

Handelsblatt writes that a recent representative online survey commissioned by Handelsblatt Online found out that 19.2% of the 1,003 respondents will give their votes to AfD in the next general election. While 54.6% of the respondents stated that their vote will surely go to parties other than AfD, 26% are still undecided, The Voice of Russia radio station reported.

The political manifesto published by the AfD calls for “an orderly dissolution of the Eurozone” and has drawn harsh criticism from other political forces. Nevertheless,  it has attracted a lot of attention from voters seeking to express their dissatisfaction with the actions of the mainstream political parties.

Euro-skepticism is fueled by political turbulence in the region and rumors about the possible pan-european wealth tax. A wealth tax on the citizens of the crisis struck countries will be the likely result of the proposals made by the Germany’s Council of Economic Experts. The confiscation of the Cypriot bank accounts has opened the floodgates of unorthodox ideas put forward by the European policy makers.

Read more:

Eurosceptics will form a political party in Germany

Putin talks economy and social development

President of Russia Vladimir Putin, known for enjoying large open-format discussions,  talks economic and social development on Live TV on April, 25. Russian television said almost 2 million people had sent questions to him by phone, email or text messages.

Earlier this week Putin predicted that global economic downturn may hamper Russia’s economic growth. There are hints of a global economic downturn, but the Russian Federation has a “safety net”, Putin told government officials in Sochi earlier on April, 22.

“The production decline and crisis developments in the world financial system may affect, and are actually affecting, our own economy as well as we can see, and we must be ready for this,” he said. Putin also addressed Russia’s slowed growth projection of 3.4%, RT Business reported.

Photo source: RIA Novosti

Photo source: RIA Novosti

In today’s live show he dismissed differences with his government over economic policy and invited Alexey Kudrin, former Russia’s Finance Minister, to return to state service. Kudrin declined the offer, because in his opinion the government lacked a program to break Russia’s dependence on raw material exports, RIA Novosti writes. In response, Putin jokingly called Alexey Kudrin a “slacker”. Putin also pointed to the unpopularity of severe austerity measures backed by liberal economists like Kudrin to cut spending and keep the deficit down.

“If you fail to look back at consequences for the social sphere, tough measures in the economy will not be always justified, especially in our country where our citizens’ incomes remain very modest,” Putin explained to the ex-minister

Read more:

Russia’s economy under Vladimir Putin: achievements and failures

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